The price action in London trading was rather tepid but overall the flavor was a lower US dollar. Data across the pond were dovish. The German unemployment rate came in at a higher than expected 7.6% for December as 18K payrolls were shed on the month. Meanwhile, eurozone producer prices dropped a whopping -1.9% in November and the sharpest decline in 27 years. Despite this, however, speculation remains that the ECB will just modestly reduce rates in their meeting this month which will help support the euro.
EUR/USD was about 30 pips higher and near the 1.3610 level just ahead of NY trading. The 1.3550 level was tested briefly in London and we expect this to be the short-term pivot here now. Dollar weakness was also prevalent in Cable as GBP/USD soared nearly 80 points into the 1.50 resistance area. Break above here should give the pair some more room to run. The yen crosses were pretty tame with USD/JPY down a modest -20 pips to 93.20/30 and EUR/JPY flat around the key 127 pivot.
Not much is scheduled in the way of economic events in NY today but the market is expected to closely watch the ADP employment numbers out at 0815ET as they attempt to gauge Friday's NFP result. The consensus is looking for a -493K drop in December for ADP and if this number comes in below expected we would look for the current -500K NFP market forecast to be downgraded. This outcome should see USD head lower on the follow. Stay tuned.
Upcoming Economic Data Releases (NY Session) previous forecast
* 1/7 13:15 GMT US ADP Employment Change DEC -250K -493K
* 1/7 18:00 GMT US Fed's Hoenig Speaks on U.S. Economy